You're considering buying a new top-of-the-line luxury car. The cars list price is $99,000. The dealer...

  

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You're considering buying a new top-of-the-line luxury car. The cars list price is $99,000. The dealer has offered you two alternatives for purchasing the car: (12 points) a. You can buy the car for $90,000 in cash and get a $9,000 discount in the bargain. Assuming that you have no cash, if you decide to choose this option, you will borrow $90,000 from your bank. Your local bank is willing to give you a car loan at an annual interest rate of 10%, compounded monthly (that is, 10%/12 per month). b. You can buy the car for the list of $99,000. In this case, the dealer is willing to take $39,000 as an initial payment. The remainder of the $60,000 is a "zero- interest loan" to be paid back in equal installments over 36 months. Decide how to finance the car and provide reasons: take the bank loan so you can pay cash to the dealer or take the zero-interest loan with the dealer. You're considering buying a new top-of-the-line luxury car. The cars list price is $99,000. The dealer has offered you two alternatives for purchasing the car: (12 points) a. You can buy the car for $90,000 in cash and get a $9,000 discount in the bargain. Assuming that you have no cash, if you decide to choose this option, you will borrow $90,000 from your bank. Your local bank is willing to give you a car loan at an annual interest rate of 10%, compounded monthly (that is, 10%/12 per month). b. You can buy the car for the list of $99,000. In this case, the dealer is willing to take $39,000 as an initial payment. The remainder of the $60,000 is a "zero- interest loan" to be paid back in equal installments over 36 months. Decide how to finance the car and provide reasons: take the bank loan so you can pay cash to the dealer or take the zero-interest loan with the dealer.

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Option 1 Bank Loan 90000 In this case let us assume that loan is repaid in ... View the full answer